I am hoping to get some good advice, as I have read many postings here and unlike many forums, it seems there are some high quality contributors here.

I started a retail e-comerce business over three years ago with a friend/co-worker and we have built the business (with office/employees etc) through the startup phase to the point now where we run between $300-$450k per month in revenue. Our annual growth is over 300% and we now EBITDA positive...although if we have a large uptick from one month to the next in sales, we have cashflow shortfalls.

Here is the motivator for my posting:

We need to restructure the accumulated debt to reduce the cost of interest so we can imporve our operating margin and continue our rocket growth and profitability, while providing breathing room on our available lines of credit for hiccups. We have financed the business, as follows:

1. Started the business on cash savings and credit cards2. Then tapped friends and family (small loans) 3. Pulled in an equity partner (cash for a small piece of the business) 4. Established a $50k BofA business line of credit (unsecured) and some BofA business credit cards5. Dipped into 401k and pensions. As we grew revenues from 0 to $30-$40k a month and then on up to about $250k per month we had to put shortfalls and timing issues (sales vs receivables) on whatever credit facility we had available (including as much at $100k in my personal credit cards)6. Once we hit the two year mark we began getting supplier credit lines and now have $200k in credit lines with them, that are all paid timely

Now, one factor in everything is that my original business partner and I both left comfortable six figure jobs to start this (3 years ago) and have had to reduce lifestyles and live off of every penny of savings, retirement and selling our homes (luckily, we sold the homes just prior to the real estate meltdown). How we have been able to manage personally while growing the business is ..well ..material for a great book - at least. Anyway, the reality is that we cannot seem to get approved for an SBA loan because of the debt on my personal credit cards (95% of which is business) and the fact that we are unable to pledge a home as collateral - oh, and we have not really had income to speak of in three years.

So - with our growth rate, time in business and profitability I think we should be able to find some version of financing that could help us without giving up "startup" levels of equity because we are way past the startup risk. People have talked to us about convertable debt, pure equity stakes and even loans based on the premise that we use part of the money to go public. What do you all recommend we do? To answer common questions: Business Plan, accountant, atty etc are in place. Thank you.

To be honest, at the revenue growth you are talking about, no financial institution is going to look at you as "start-up."You have moved into the realms of a Medium Enterprise. At this level, there is a lot more work necessary to get you financing.You also have been in business for the greater part of 3yrs. SBA financing usually does not extend beyond the 2yr mark.This being said, we have to look at your financials. (although I'm sure we'll hear from a few scams offering unsecured lines over the 100K mark, you know who you are)You mentioned that you are maxed out with 95% credit card debt and you mentioned the collateral on your home being all tied up.How does your business partners personal financials look? Are they maxed out as much as you are?What kind of financing are you looking for? I would imagine you are speaking of a loan in the range of 1,000,000 with the revenues you are declaring.What kind of retail ecommerce are you? Are you selling bathroom fixtures or makeup? Do you have a website we can take a look at?I would be interested in speaking to you further. My firm specializes in commercial financing of businesses of all sizes.If you would like to speak further, you may contact me at d.skolnick@skolnick-associates.com.

CC08, Thank you for your feedback. We sell a wide range of products and operate 15 websites, with more in development. Our plan is to continue the development of more Niche sites, improve backoffice systems and add more products to our mix. Your 1M mark is in the ballpark. We can operate, as is, without any add'l funds. However, the consolidation of our balance sheet debt at a lower carrying cost (interest) is probably wise. Additionally, we don't want to tread water, we want to fuel the growth. So, I think $400k or so to consolidate and the rest to fuel the growth is a good plan. Would you recommned a loan approach or one of the other ones I mentioned?

I think the financial strength is there for a financial institution to lend to.I would suggest having a consultant help present the financial package for underwriting.If you would like to go that route, give me a shout and we can talk.

Well, since I posted the 15 site number, we are up to 24 websites (with several more in development) and our revenues are up from 250k to more than 400k per month. Most stores are niche sites offering specific products focused around a niche. We do operate a couple sites that function as a mass merchandise / offer-everything site.

v-gura, Sounds like a success story to me. You write a great question and proof of the American dream.Find a publishing house that would offer you a LARGE cash advance for " material for a great book".Don't like that idea. O K. You also talked about getting supplier lines of credit .What about Your RECEIVABLES.?? Have you thought about "FACTORING" them.If I come up with any other ideas, I will post them.Good luck, LUCKIEST

A book advance - I like it. Now, I need to find that agressive publisher. ;)

Our receiveables are pretty good because they are credit cards and average about 9 days to make it to the bank. Do you think factoring them is wise? I know I have heard of people factoring NET 30 etc. I have heard that it is usually for a fee of single to even double digits %. Seems expensive on a comparison to any reasonable APR (but, I am not sure I am right - please let me know your thoughts)

Supplier lines of credit definitely help us and we are working to add more. In essence they have "financed" a portion of our growth.

With 250k/month sales are you having a hard time increasing your margin by 1-2%? i mean a 2% increase is 60k/year

What is your most expensive part of doing business? Do you do your own inventory? Have you re-negotiated supplier pricing? Have you addressed all shipping options? Can you inflate certain shipping prices to specific zones to add another profit center without chasing away customers?

The high personal utilization will bite you no matter what.. i was able to shrink my down a bit and move some of my personal charges back into the business and that helped me tons (not to mention improved my score my leaps and bounds)

Ways to improve your ecommerce margin:

1. Automation - integrate your purchase, procurement and warehousing into a fluid system. Our ecommerce platform automates PO's to our suppliers, imports order tracking details nightly, emails our customers shipping info, bills upon ship confirmation, sends a thank you letter and if over xxxx.xx amount purchased we send a snamil mail letter with a thank you from our president, a discount on the next purchase and slap-on return receipts if anything needs to be returned. best 41 cents i can spend to show a customer i care! We also automate integration with shopping portals, search engines, data feeds and what not. No manual work other than pricing & customer service really ;)2. Shipping Restructuring - negotiate better buying power with Fedex, DHL, UPS and use online USPS discounts whenever available3. Merchant account shopping - have you shopped around for better rates? You should be 1.9% or lower with that churn4. fulfillment/dropshipping. Is your distributor good at dropshipping? Have you shopped around for fulfillment houses instead of doing your own warehousing? Depending on yoru business plan if its volume you need you better work with partners that can sustain it! Some of my suppliers offer fantastic UPS rates and 3.00 per unique shipment fulfillment while others charge full retail rates + 5.00 fulfillment so sometimes its best to buy bulk and work with an existing fulfillment center to process at x.00 per order and xx per square foot warehouse used

Sell off what you don't use - liquidate what isn't selling..

Honestly you may be better off increasing your margin 5-10% and loosing an equal amount of sales and still be better off as you may be more "prime" to grow than trying to fund your current thin margin.

I sell consumer electronics/technology stuff so i know what THIN means ;)

Yeah, the impact of small changes on the business yield significant results (that goes both ways too). The margin is thin overall in ecomm and we are always beating up vendors on price and pitting the shipping carriers against each other. The inventory is a blend of in house, owned but outsourced fulfillment and pure dropship. We balance the costs of carrying inventory with the improvement in margin (from bulk buys etc).

As far as automation, we are automated in many ways, but not enough for my liking. Probably never will be. ;)

Customer service is expensive (800# expense and people) and the more we can automate that, the more business I think we can handle without adding more CS resources. Do you have any systems or vendors you would recommend for automation?

Have you tried including return postage with everything shipped? That way your CS department doesn't have to take a call and process it manually? Do you get the same question over and over? What is your typical support scenerio?

As far as automation - thats going to be hard with as many sites that you have. I used to run a couple but have since dwindled it down to one site that i can market & integrate fully.

We are shipping about 3,000 shipments per month (this is non-holiday) and we were told by our shipping carrier that the return label would cost us about $8 each at the point of creation of the label and then we would have to cancel them by tracking number if they were not used (after our return policy expires). This is about $24k a month float on potential returns. Have you found a less painful (cost and time) way to do this?

Yeah, with all of the sites we operate it presents a bit of a bear on the backend integration. We have looked at Netsuite and a couple other systems that allow for consolidated backend on multiple front-end sites. I would love to any ideas on this.

Normal customer service issues are lost packages, returns, returns tracking and etc.

You should never have to pre-pay for return labels. Fedex, UPS and USPS offer free return labels with tracking that are only paid for when used. USPS even has a service you can integrate with your website to download PDF labels that your customers can tape onto a package and you can track the returns that way. USPS is somewhat more affordable for return shipping and doesn't charge for saturday/residential pickup or fuel surcharges. Fedex ground though is getting really competitive on pricing/volume though!

Automation is the key. Print those return receipts, have the customer fill out the return form. Make it as self service as possible. If you don't include it in the box, do it through the website in a self-service setup.

Use a CRM system to create exception reports that your support/customer service group can use to be pro-active on. Track how many orders get back ordered, track how many are taking longer than x days to receive confirmation. Track signature required packages. Track which customers demand the most service and why and integrate this logic into your business intelligence.

We had to switch from UPS to USPS for the holidays because UPS streached our shipments out to 9-10 days for residential and without an automated system to capture this and see "re-scheduled" shipments we would have had to manually check shipments to capture this. Had a few upset customers but were able to change new orders to meet delivery dates and update our customers on reason for delay.

Hi My name is Sam Segal I can help you to reduce your merchant service cost and provide you cash on advance based on your future receivable,If interested please call me at 1-877-274-7933www.capitalformerchantsnow.com

Seems to me like you have really done your homework and you just have not found the right source for your current needs. Your business model is proven and you have a strong tract record of making money. Its obvious that you have put alot of sweat equity into your business. You just need a shot to get your business to the next level. email me cory@walkerlender.com--www.phoenixfinancialpartners.com

The problem Vguru is that your caught in no-man's land. Your beyond the SBA but too small for most banks. I have relationships with private lenders who are asset based lenders. One in particular will lend against receivables,inventory, equipment and is much cheaper than a factoring company. The problem is that most banks are looking to do corporate loans of $5 million and above. Right now, you don't have the financials to support that type of loan. The lenders I deal with are in the $5million and below loan range.Please contact me at www.msfcapitaladvisors.com so we can discuss further.

Hello V-Guru, First I want to Congratulate you on your success. It does appear however,that you have used your personal assets to fund and obtain credit for your business and I have a few sugesstions. Structure a corporation or LLC thus reducing your personal liabillity, build corporate credit and establish trade lines to build your business credit profile thus obtaining a paydex score of 80 or higher, obtain corporate credit by utilizing a network of contacts in the banking industry.

I am hoping to get some good advice, as I have read many postings here and unlike many forums, it seems there are some high quality contributors here.

I started a retail e-comerce business over three years ago with a friend/co-worker and we have built the business (with office/employees etc) through the startup phase to the point now where we run between $300-$450k per month in revenue. Our annual growth is over 300% and we now EBITDA positive...although if we have a large uptick from one month to the next in sales, we have cashflow shortfalls.

Here is the motivator for my posting:

We need to restructure the accumulated debt to reduce the cost of interest so we can imporve our operating margin and continue our rocket growth and profitability, while providing breathing room on our available lines of credit for hiccups. We have financed the business, as follows:

1. Started the business on cash savings and credit cards2. Then tapped friends and family (small loans) 3. Pulled in an equity partner (cash for a small piece of the business) 4. Established a $50k BofA business line of credit (unsecured) and some BofA business credit cards5. Dipped into 401k and pensions. As we grew revenues from 0 to $30-$40k a month and then on up to about $250k per month we had to put shortfalls and timing issues (sales vs receivables) on whatever credit facility we had available (including as much at $100k in my personal credit cards)6. Once we hit the two year mark we began getting supplier credit lines and now have $200k in credit lines with them, that are all paid timely

Now, one factor in everything is that my original business partner and I both left comfortable six figure jobs to start this (3 years ago) and have had to reduce lifestyles and live off of every penny of savings, retirement and selling our homes (luckily, we sold the homes just prior to the real estate meltdown). How we have been able to manage personally while growing the business is ..well ..material for a great book - at least. Anyway, the reality is that we cannot seem to get approved for an SBA loan because of the debt on my personal credit cards (95% of which is business) and the fact that we are unable to pledge a home as collateral - oh, and we have not really had income to speak of in three years.

So - with our growth rate, time in business and profitability I think we should be able to find some version of financing that could help us without giving up "startup" levels of equity because we are way past the startup risk. People have talked to us about convertable debt, pure equity stakes and even loans based on the premise that we use part of the money to go public. What do you all recommend we do? To answer common questions: Business Plan, accountant, atty etc are in place. Thank you.

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